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Introduction to Operations Management

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Presentation on theme: "Introduction to Operations Management"— Presentation transcript:

1 Introduction to Operations Management
Chapter 1

2 Generic Conversion Process


4 Goods & Services Differences in creation & management Compensation
Sector growth & future

5 20th Century US Employment
1900 2000 1950 1925 1975 50% 25% 75%

6 Operations Heritage Eli Whitney Taylor, Gilbreths & Ford
Hawthorne Experiments Walter Shewhart & Ed Deming George Dantzig Shingo & Ohno

7 Trends in P/OM E-business Agility Ethics SCM Mgt of technology
Outsourcing Globalization

8 Competitiveness, Strategy and Productivity
Chapter 2

9 Mission Accomplished! Missions Strategies Quality Cost Flexibility
Social responsibility Deliverability

10 Strategy Development & Implementation
SWOT analysis Critical success factors Staffing Integration of OM w/other activities

11 Strategic Fit Organization Environment Strengths Weaknesses
Opportunities Threats

12 Productivity Mathematical & intuitive definitions Number of inputs
Usefulness Factors affecting

13 Compute the multifactor productivity measure for each of the weeks shown. What do the productivity figures suggest? Assume 40-hour weeks and an hourly wage of $12. Overhead is 1.5 times weekly labor cost. Material is $6 per pound. Week Output (units) Workers Material (lbs) 1 30,000 6 450 2 33,600 7 470 3 32,200 460 4 35,400 8 480

14 Strategic OM Decisions
Product & service design Capacity Process selection & layout Work design Location Quality Inventory Maintenance Scheduling Supply chains Projects

15 Forecasting Chapter 3

16 Production & sales planning
Time Horizons Short, medium, long-range horizons Differences in horizons Plan the system Plan the use of the system 3 years Now Location, new products Production & sales planning Scheduling Our focus 3 months

17 Forecasting Approaches
Economic Technological Demand Qualitative Quantitative

18 How to Forecast Use subject matter knowledge Use graphical methods
Select model(s) Gather data Forecast Validate

19 Features of Forecasts Accuracy Paradigm Horizon Aggregate Timely
Accurate Reliable Appropriate units Parsimonious Documented

20 Qualitative/Judgment Forecasts
Why use one? Data, time, arena Techniques Jury of executive opinion Salesforce Opinion Consumer Survey Delphi Method Nominal Group Technique

21 Time Series Observations over a fixed interval of time
Components of time series Trend Seasonality Cycles Irregular variations Random variation

22 Notes on Notation F = Forecast A = Actual (known demand)
t+1 = next period, t = current period A bar over something means “average” e.g. ∑ = repeated addition (summation) X

23 Time Series Techniques
Naïve Method Note discrepancy from text Moving Average Exponential Smoothing

24 More Time Series Equations
Exponential Smoothing (alternate version) Linear Trend

25 Depends, Inc. sells adult diapers
Depends, Inc. sells adult diapers. Monthly sales for a seven month period were as follows. Month Sales (000 units) Feb 19 Mar 18 Apr 15 May 20 Jun 18 Jul 22 Aug 20 Plot the data Forecast sales for September using linear trend; 5 month moving average; exponential smoothing with alpha=0.2 assuming a July forecast of 19; naïve approach; weighted average of .60 for Aug, .30 for July, and .10 for June.

26 Seasonal Data Deseasonalizing alternatives
A tourist center is open on weekends. The manager hopes to improve scheduling of part-time employees by developing a forecasting model. He assigns you this task but will ultimately take credit for your model. 1 2 3 4 5 6 Friday 149 154 152 150 159 163 Saturday 250 255 260 268 273 276 Sunday 166 162 171 173 176 183

27 Associative Forecasting
One item’s value depends on another item’s value Linear regression

28 The following data were collected during a study of consumer buying patterns.
Observation X Y Observation X Y Plot the data. Obtain a regression line. How much variance is explained? Predict Y when X=41.


30 Accuracy & Control MAD = Mean Absolute Deviation Tracking Signal =
MSE = Mean squared error

31 Doug Moodie is the president of Garden Products Limited
Doug Moodie is the president of Garden Products Limited. Over the last 5 years, he has asked his vice president of marketing and his vice president of operations to provide sales forecasts. The actual sales and the forecasts are given here. Which vice president is better at forecasting? Year Sales VP Mkt VP Ops 1 167,325 170,000 160,000 2 175,362 165,000 3 172,536 180,000 4 156,732 175,000 5 176,325

32 Product & Service Design
Chapter 4

33 Product Life Cycle Introduction Growth Maturity Decline Volume time
Production method, run length & capacity Product design Process reliability

34 Product Development Dis-integrated design processes
Standardization & modular design Manufacturability & value engineering Green manufacturing R&D versus benchmarking # Ideas Proposed Prototype Mkt. Test Produced

35 Computer Aided Design Used for Integration w/CAM drafting simulation
testing Integration w/CAM


37 Service Blueprinting Physical Evidence Customer Onstage Service
Backstage Service Support Line of Interaction Line of Visibility

38 Quality Function Deployment
A structured and disciplined process that provides a means to identify and carry the voice of the customer through each stage of product or service development and implementation QFD is: Communication Documentation Analysis Prioritization QFD is a structured and disciplined process that takes time. QFD uses customer input to develop, implement, and improve a product/service. QFD improves communication in the following ways: The organization acts to understand its external customer. Vertical departments are involved in the design and development of products and services. QFD provides a team structure, which improves communication among team members. The QFD team and management communicate in a structured, documented fashion. The QFD matrices provide a detailed project tracking system that incorporates the QFD team’s consensus thinking process. The matrices provide a structured approach to analyze & prioritize input breakthroughs

39 Japanese QFD Results Design time reduced by ¼ to ½
Problems with initial quality decreased Comparison and analysis of competitive products became possible Communication between divisions improved Design time was reduced by one third to one half based on a study by Yoji Akao for JUSE in Reference Better Designs in Half the Time by Bob King, page 1-3, edition 3.0. Companies using QFD found a decrease in product/service problems related to design because QFD focused the organization on capability-driven designs. The Quality Characteristics/Demanded Quality (QC/DQ) chart provides a section to benchmark the organization against its competitors based on the voice of the customer. Communication between organizational units improved because each organizational unit was a part of the QFD team and spoke based on facts and the voice of the customer.

40 Product Design Time Line
definition design redesign old system new system The old system created products with a design often based on the voice of the engineer. It is often called “folklore” design because it is guided by intuition. The end result is products sent to manufacturing that do not met process requirements, which causes continuous redesign and a wall placed between design and production and production and customer service. The method behind “folklore” design is “fire, ready, aim.” The new system is based on a marketing approach that factually understands the customer’s needs and expectations. By expanding the time taken to define the product, QFD virtually eliminates the need for redesign, especially on the critical items. Better documentation, improved communication, and a focus on priorities improves the efficiency of the initial design and significantly reduces the need for redesign.

41 Quality Function Deployment (in 75 minutes or less)
Smylie Cellphone is a one-product company founded in Its product is a cell phone. The company’s annual sales last year were $18 million all in the United States. The company is located in Edmond in its own 400 square foot manufacturing plant and has 4 employees. The company recently completed a five-year business plan with a goal of expanding from a one-product to a multi-product line. The plan is to expand sales by attracting new customers and penetrating foreign markets. The company wants to develop a new cell phone that will appeal to adults in both the United States and foreign markets. Smylie Cellphone has selected your team to provide quality function deployment consulting services to help develop the new product. Your team has agreed as a first phase to develop chart A-1 detailing the following: 1.Voice of the customer 2. Degree of importance 3. Company now and competitive comparison 4. Company plan 5. Improvement ratio 6. Sales point 7. Importance weight 8. Relative weight 9. Graphical competitive comparison 10. Quality characteristics 11. Relationships 12. Importance weight 13. Relative weight 14. Technical comparison 15. Special requirements 16. Correlation matrix The study must be painstaking in detail, unerring in accuracy, and completed in one hour. To show its commitment the company has agreed to have a representative available throughout the period for clarification and consultation. 1 10 11 2 3 4 5 6 7 8 9 12 13 14 15 16

42 1. Voice of the customer - Identify all customer groups and collect accurate information about their wants and needs (restrict yourself to 10 needs given our time constraint) 2. Degree of importance - Identify the relative priority of each customer requirement using customer input to determine the values wherever possible. Use a scale of one to ten with ten indicating very important items. 3. Company now and competitive comparison - Rate your current product (use the worst looking wallet in your group - in the event of a dispute as to whose wallet looks the worst, the company representative’s decision is final) and two competitors products on a scale of one to five with five being the best. 4. Company plan - Determine what level you plan to achieve for each customer requirement. Since WWW’s resources are finite, make your improvement decisions based on steps 2 and 3. That is, choose the most important items where you can gain a clear advantage over your competitors. Use a scale of one to five with five being best. 5. Improvement ratio - Quantify the improvement planned for each customer requirement by dividing the value of the planned level by the current company rating. 6. Sales point - Identify major and minor points (front-of-the-brochure claims) by using information in columns 2 and 4. Restrict yourself to only a few sales points (perhaps two major and a minor point since we have only ten customer demands). Indicate the major points with this symbol  and the minor points with this symbol  . The major points are worth 1.5 and minor points are worth 1.2. 7. Importance weight - Quantify the importance of each customer requirement to your company with the following equation: Importance weight = (column 2) x (column 5) x (column 6). 8. Relative weight - Find the relative importance of each item in column 7 by summing column 7 and dividing each entry by the total. Express this as a percentage. 9. Graphical competitive comparison - Plot the information in column 3 using a different symbol for the company and two competitors. This provides a comparison at a glance between the competitors rather than forcing the analyst to hunt for information in the matrix. 10. Quality characteristics - Develop this list internally by looking at features of your current product, e.g., the stitching, type of leather, etc. 11. Relationships - Identify all relationships that quality characteristics (column 10) have on voice of the customer items (column 1). Evaluate each pair by asking if the quality characteristic in any way affects the customer demanded quality item. Indicate the strengths of relationships by using the symbols , , and  for strong (9), moderate (3), and weak (1) relationships respectively. Do not expect to find relationships between every pair of requirements. 12. Importance weight - Quantify the importance of each technical requirement by multiplying the value of any relationships shown in the column of the technical requirement times the relative weight of the customer requirement. 13. Relative weight - Similar to column 8 except you total the importance weights from row 12 and divide the weight of each item by the total. Express this as a percentage. 14. Technical comparison - Identify how well you and your competitors fulfill each of the technical requirements using the same symbols and scale as in column 9. 15. Special requirements - Identify any components governed by external sources, such as FDA, UL, etc. rules. 16. Correlation matrix - Compare quality characteristics against each other to identify complementary or conflicting relationships early in the design process. Use the symbols  and  for strong and some positive correlation and x and  for some and strong negative correlation respectively.


44 Reliability Chapter 4S

45 Reliability Probability Failure
Normal operating conditions (remember Taguchi) Redundancy

46 Failure Rates Product failure rate (FR) expressed in terms of time FR(N) or fraction of items tested FR(%)

47 Physio-Control burns-in their defibrillators for 24 hours after they are assembled. Over the past week they have produced 300 LifePak 12s. One unit failed on the first charge discharge cycle. Compute the failure rates and mean time between failures.

48 Reliability Calculations
Two items that both must work for the system to perform are said to be in series 0.95 0.90 =

49 Backups (Redundancy) =
These two components form a parallel subsystem that improves reliability 0.80 0.70 0.95 =

50 One of the industrial robots designed by a leading producer of servomechanisms has four major components. Components’ reliabilities are .98, .95, .94, and .90. All components must function in order for the robot to operate effectively. What is the robot’s reliability? If one backup can be added, where should it be? If one 0.92 backup can be added, where should it be?

51 MTBF/TF & the Bathtub Product failure is described as f(t)=λe-λt and when the slope of this cumulative failure curve is plotted, we get a bathtub shaped curve. Failure Rate Time

52 Mean Time Between Failure Calculations
P(no failure before T) = e -(T/MTBF) where: e is (and a calculator button) T is a specified length of time MTBF is the mean time between failures as determined by historical data Probabilities working the way they do, what’s the probability of failure before T?

53 FOX intends to launch a satellite that will enhance reception of television programs everywhere and complete Rupert Murdoch’s plan for world domination. According to FOX engineers, the satellite will have a useful life of eight years (four times as long as a typical sitcom). Determine the probability that the satellite will: a. Last more than nine years b. Last less than twelve years c. Fail between years nine and twelve

54 Availability “Complete” picture of reliability

55 Capacity Planning Chapter 5

56 CAPACITY Importance Measurement Demand, $, Management
Design = Maximum attainable Utilization = Actual/Design Efficiency = Actual/Effective

57 A work center operates 2 shifts per day 5 days per week (8 hours per shift) and has 4 machines of equal capability. This is the effective capacity. If the work center has a system efficiency of 95%, what is the expected output in hours per week?

58 Adjusting Capacity Long Term Short Term OVER UNDER

59 Break-Even Analysis $ P = Selling Price TR = Revenue VOLUME (x)
TC = Total Cost F = Fixed Cost V = Variable Cost assumptions?? VOLUME (x)

60 You are considering opening a copy service in the University Center
You are considering opening a copy service in the University Center. You estimate your fixed cost at $15,000 and the variable cost of each copy sold at $ You plan to sell at $0.05. What is the break-even point in dollars? What is the break-even point in units?

61 Decision Theory Chapter 5S

62 Decision Making Alternatives States of nature Likelihood Payoffs

63 Decision Making Under Certainty
The most unexciting of the decision environments... Next year’s demand Alternative Low High Do nothing $50* $60 Expand Subcontract *profit in thousands

64 Decision Making Under Risk
Likelihoods of the states of nature can be assigned a probability of occurrence and the payoff for each outcome can be estimated. Expected Monetary Value (EMV) Criterion

65 Clay Whybark, a soft drink vendor at Hard Rock Café’s annual Rockfest, created a table of conditional values for the various stocking sizes and crowd sizes. With the probabilities of the crowd sizes as indicated, what’s the best stock size for Clay to get rich? Crowd Size Alternative Big Average Small Large Stock $22* Average Stock Small Stock Probability *additional profit in thousands

66 Decision Tree Analysis
Circles show states of nature Decision Tree Analysis $22 Squares represent decision points a $12 1 -$2 These lines represent alternatives 1 2 $14 b $10 3 $6 9 c $8 $4

67 An entrepreneur must decide on the size of a latte stand to construct
An entrepreneur must decide on the size of a latte stand to construct. The manager has narrowed the choice down to two: large or small. If he builds large and experiences low demand he could grin and bear it ($200), lower prices ($225), or hire street performers to attract attention ($175). If he builds small and experiences high demand he could do nothing ($175), stay open longer hours ($225), improve processes ($250), or raise prices ($200). Building large for large demand has an expected payoff of $250 and building small for small demand has an expected payoff of $175. There is a 0.7 probability of high demand and 0.3 probability of low demand. What size stand should be constructed to slake the unquenchable thirst of caffeine addicts?

68 DMUR Expected payoff under certainty
Expected value of perfect information EVPI = EPUC - EMV

69 Four alternative manufacturing methods are being considered for a new product. Profitability, which depends on method of manufacture and level of consumer acceptance, is anticipated as shown here: Profit ($ Thousands from Product) Projected Acceptance Method Low Med High Very High Probability Which method is best? What’s the most the company should invest in analyzing the situation?

70 Decision Making Under Uncertainty
Characterized by a complete lack of knowledge regarding the likelihood of occurrence for each state of nature Maximax Maximin Minimax regret Laplace/equally likely

71 Very Favorable Average Unfavorable Build new plant $350,000 $240,000
Given the following conditional value table, determine the appropriate decision under uncertainty using: Maximax Maximin Minimax Laplace Very Favorable Average Unfavorable Build new plant $350,000 $240,000 -$300,000 Subcontract $90,000 $180,000 -$20,000 Overtime $110,000 -$10,000 $60,000 Do nothing $0

72 A firm produces a perishable food product at a cost of $10/case and sells it for $15. The firm considers possible demands of 100, 200, and 300 cases. If demand is less than production, the excess is discarded but if demand is more than production the firm will produce the shortfall at $18/case. If P(100)=.2, P(200)=.2 and P(300)=.6, how much should be produced?

73 A decision maker faced with four alternatives and four states of nature develops this payoff table.
If the decision maker knows nothing about the chances of occurrence of each state of nature, what would reasonable decisions be? How do your conclusions change if these values represent costs instead of revenues? s1 s2 s3 s4 d1 14 9 10 5 d2 11 8 7 d3 d4 13

74 Process Selection & Facility Layout
Chapter 6

75 Determinants Degree of customization Volume Make-to-order
Assemble-to-order Make-to-stock Volume

76 Process Types Project Job shop Batch Repetitive Continuous (flow)

77 Product-Process Matrix
Product Variety Output Volume

78 Layouts Product Process Fixed-position Combination Cellular Office
Retail Warehouse

79 Group Technology Part families Setup time, transportation, congestion
Service applications

80 Layout Considerations
Material handling Information flows Environment/aesthetics Capacity Costs

81 Assembly-line Balancing
Cycle Time (CT) Operating Time Output Output = Minimum # Stations = Task Times Cycle Time

82 Line Balancing Rules Obey precedence requirements
Obey scheduling rule(s) Fill up as much time as possible at each station Compute efficiency & balance delay (idle time) since you’ll probably have to defend your balance

83 Task Time Pred Z 30 -- Y 42 X 12 Z, Y W 6 V 48 U 24 T S 36 T, V R U, S
Use this table to balance the line for an output of 320 units in an 8 hour work day. Create a precedence diagram and balance the line using the largest-process-time rule and the smallest-process-time rule. Work times are in seconds. Task Time Pred Z 30 -- Y 42 X 12 Z, Y W 6 V 48 U 24 T S 36 T, V R U, S

84 The Mach 10 is a one-person sailboat designed to be used in the ocean
The Mach 10 is a one-person sailboat designed to be used in the ocean minutes are available each day to manufacture the Mach 10. The daily demand is 60 boats. Task (minutes) Follows a 1 - b 1 a c 2 a d 1 c e 3 c f 1 c g 1 d, e, f h 2 b I 1 g, h Draw the precedence diagram. Determine the percentage of idle time.

85 An assembly line with 30 activities is to be balanced
An assembly line with 30 activities is to be balanced. The total amount of time to complete all 30 activities is 42 minutes. The longest activity takes 2.4 minutes and the shortest takes 0.3 minutes. The line will operate for 450 minutes per day. What are the maximum and minimum cycle times? What output rate will be achieved by each of those cycle times? Suppose this line is balanced using ten workstations and a finished product can be produced every 4.2 minutes. What is the production rate in units/day? What is the assembly line efficiency?

86 Office Layouts Requirements Good (not great) answers
Minimizing transportation costs Muther grids

87 Registration at UCO has always been a time of emotion, commotion, and lines as students move among four stations as shown here students moved from paperwork station A to advising B, and 550 went directly from A to picking up class cards C. Graduate students proceeded from A to the Bursar D. Adjacent stations are 30’ apart. What is the load x distance of the layout shown? Provide an improved layout and compute its cost. A B C D -- 450 550 50 350 200 750 A B C D

88 Use the information in the grid to assign departments to a 3x3 office space.
1 2 3 4 5 6 7 8 X A O X O O E A E X A A A A E O A A A A A E

89 Linear Programming Chapter 6S

90 Linear Programming Used when scarce resources are used by competing products. Objective Decision variables Constraints Parameters

91 Rotgut White Lightning Corn 1 2 Sugar 3 Jugs Hours
I make two different kinds of moonshine to supplement my meager wages. Rotgut sells for $8 per jug and White Lightning, the premium brand, sells for $12/jug. Below is a list of ingredients for a batch of each type: Rotgut White Lightning Corn 1 2 Sugar 3 Jugs Hours I have on hand the following:40 bushels corn, 70 pounds sugar, 50 jugs, and 72 hours (before the revenoors come to bust up my still) How much of each flavor should I make?

92 Assumptions Linearity Divisibility Certainty Nonnegativity

93 Model formulation Identify decision variables
Write an objective function Identify all constraints Write constraints with all decision variables on the left side of an inequality Solve it graphically, using Excel, or simplex

94 Graphical Solutions Work with only two decision variables Sketch axes
Plot each constraint (pick (0,y) and (x,0)) Identify feasible region Find vertices of feasible region Evaluate objective function

95 Solve the following problem graphically:
Maximize Z = 4X + 6Y Subject to X Y ≤ 8 5X + 4Y ≤ 20 X,Y ≥ 0

96 The grand Valley Company, run by the J Motwani family, produces two products, bed mattresses and box springs. A prior contract requires that the firm produce at least 30 mattresses or box springs, in any combination per week. In addition, labor union agreements demand that stitching machines be kept running at least 40 hours per week, which is one production period. Each box spring takes 2 hours of stitching time, while each mattress takes one hour on a machine. Each mattress produced costs $20; each box spring costs $24. Write the objective function and constraints in canonical form. Solve graphically.

97 Linear Programming in Excel
One of Excel’s useful features is the ability to solve linear programming problems (especially those beyond our graphical abilities). The feature is invoked by creating a spreadsheet containing the objective function and constraints, selecting Tools from the main menu, and Solver from the submenu

98 Here is an Excel version of the moonshine problem
B C D E F G 3 16 24 4 Rotgut White Lightning 5 2 =D5*D3+C5*C3 Profit 6 7 Corn 1 =D7*$D$5+C7*$C$5 <= 40 8 Sugar =D8*$D$5+C8*$C$5 70 9 Jugs =D9*$D$5+C9*$C$5 50 10 Hours =D10*$D$5+C10*$C$5 72 Here is an Excel version of the moonshine problem B C D E F G 3 $16.00 $24.00 4 Rotgut White Lightning 5 2 $ Profit 6 7 Corn 1 <= 40 8 Sugar 10 70 9 Jugs 50 Hours 72 The top view shows formulas and the bottom view shows initial calculations.

99 Once the basic set of equations has been entered, launch Solver and fill in the dialog boxes with references to your sheet. Target cell - The objective function value (E52) Equal to - Choose max or min based on the problem By changing cells - The decision variables (C52:D52) Subject to the constraints - Add all constraints one at a time by referencing their function values (e.g., the amount of corn used, E47 must be less than the amount of corn on hand, G47) Once all constraints have been entered, choose Options and check the boxes for Assume Linear Model and Assume Non-Negative. Finally, choose Solve and wait for Excel to work its magic

100 Solver Output Reports Answer Report - contains the basic answer to the problem and reveals which constraints had an impact on your situation. Sensitivity Report - tells you reduced costs and shadow prices Limits Report - don’t bother asking for this one. We won’t use its information.

101 The value of the objective function at the optimal solution
Microsoft Excel 11.0 Answer Report Worksheet: [Moonshine.xls]Formulation Report Created: 10/2/2006 1:09:33 PM Target Cell (Max) Cell Name Original Value Final Value $E$5 $ Adjustable Cells $C$5 Rotgut 10 $D$5 White Lightning 15 Constraints Cell Value Formula Status Slack $E$10 Hours 65 $E$10<=$G$10 Not Binding 7 $E$7 Corn 40 $E$7<=$G$7 Binding $E$8 Sugar 60 $E$8<=$G$8 $E$9 Jugs 50 $E$9<=$G$9 The optimal values of the decision variables A binding constraint is one that limits the value our objective function can assume. We use up all of our corn and jugs (we have no slack). If a constraint is not binding, then we have some left over (slack) when we implement the optimal solution. We have 10 pounds of sugar and 7 hours to spare.

102 Increases or decreases within these ranges will result in the same product mix (but a different objective function value). Microsoft Excel 11.0 Sensitivity Report Worksheet: [Moonshine.xls]Formulation Report Created: 10/2/2006 1:09:33 PM Adjustable Cells Final Reduced Objective Allowable Cell Name Value Cost Coefficient Increase Decrease $C$5 Rotgut 10 16 8 4 $D$5 White Lightning 15 24 Constraints Shadow Constraint Price R.H. Side $E$10 Hours 65 72 1E+30 7 $E$7 Corn 40 $E$8 Sugar 60 70 $E$9 Jugs 50 5 A one unit in(de)crease in the original amount of corn available will in(de)crease our profit by this amount Amount of resource to be taken away for a non-binding constraint to become binding, or a binding constraint to become more so. Extra amount of resource needed for a binding constraint to become non-binding. Note that this doesn’t apply to non-binding constraints, hence the huge amounts indicated.

103 Design of Work Systems Chapter 7

104 Labor as an Input Flexible & inflexible Quality of life
Job classification & work rules

Specialization Job Rotation Job Enrichment Job Enlargement Teaming

Gang Chart Operations Chart

107 Visual Workplace Big picture Performance Housekeeping

108 TECHNICAL APPROACHES Ergonomics Work Measurement ignorance
historical data direct time study predetermined time study work sampling

109 Direct Time Study Method
Define tasks Determine sample size Take measurements Rate performance

110 What sample size should be used:
if there should be a .95 probability that the value of the sample mean is within 2 minutes, given that the standard deviation is 4 minutes? there should be a 90% chance that the sample mean has an error of 0.10 minutes or less when the variance is estimated as 0.50 minutes?

111 Direct Time Study Observed Cycle Time (OT) = average observed time
Normal Time (NT) = OT x Performance Rating < 100% is slow > 100% is fast Standard Time (ST) = NT/(1- Allowance Factor) breaks fatigue downtime

112 Work Sampling Percentage of time on a task Define task Spy randomly

113 If a worker has times of 8.4, 8.6, 8.3, 8.5, 8.7, 8.5, a performance rating of 90%, what is the normal time? If the allowance factor is 15%, what is the standard time for this operation?

114 A part-time employee who rolls out dough balls at a pizza restaurant was observed over a 40 hour period for a work sampling study. During that time, she prepared 550 pieces of pizza dough. The analyst made 50 observations and found this employee not working four times. The overall performance rating was The allowance for the job is 15%. Based on these data, what is the standard time for preparing pizza dough?

115 Labor Standards Labor Efficiency Variance measures the difference between expected and actual costs.

116 A trucking company’s labor standard is 320 miles/8 hour shift
A trucking company’s labor standard is 320 miles/8 hour shift. Drivers logged 31,525 miles and recorded 822 hours of work. If drivers are compensated $15/hour, what is the labor efficiency variance? If the standard is lowered 10% what is the labor efficiency variance?

117 A farming conglomerate expects a four person hay crew to place 1,750 bales in the barn per day. The labor cost is $600 per day for a crew of four. In the past four days 8,100 bales have been harvested. Should the conglomerate be pleased with this level of output?


119 Learning Curves Chapter 7S

120 Learning Curves Relationship between repetition & speed Conventions
doubling output constant percentage decrease expressed as the complement

121 Learning Curve Equations

122 Professor Geoff Willis takes 15 minutes to grade the first exam and follows an 80% learning curve. How long will it take him To grade the 25th exam? To grade the first 10 exams?

123 Location Planning & Analysis
Chapter 8


125 Service Location Purchasing power Service & image compatibility
Competition Quality Uniqueness Facility physical quality Operating policy Management quality

126 LOCATION FACTORS Proximity Costs Culture Politics

Locational cost volume (semi- breakeven) minimizes total costs in desired output range Factor rating method creates scores for sites based on factors & importance $ SITE Q SITE W SITE X VOLUME

128 Location Per Year Per Unit
Fixed and variable costs for four potential plant sites are below: Enumclaw $100K $30 Renton $150K $20 Kent $200K $35 Snoqualmie $250K $11 Over what range of output is each alternative superior? If the anticipated output is 8,000 units per year, which location is best? Fixed Variable Location Per Year Per Unit


130 ANALYSES Transportation Model Center of gravity & simple median models
minimizes transportation costs using LP Center of gravity & simple median models minimizes transportation costs using geometry

131 City X Y Hugo 9.2 3.5 Durant 7.3 2.5 Players 7.8 1.4 Blackwell 5.0 8.4
A chain of insurance firms in OK needs to locate a central office from which to conduct internal audits and other periodic reviews of its facilities. Each site, except for Players, will be visited three times a year by Carroll Fisher, who will drive from the central office. Players will be visited five times a year. What coordinates represent the distance-minimizing central location for this office? What other factors should be considered? City X Y Hugo 9.2 3.5 Durant 7.3 2.5 Players 7.8 1.4 Blackwell 5.0 8.4 Waurika 2.8 6.5 Velma 5.5 2.4 Ardmore 3.6 Hooker 3.8 8.5

132 Management of Quality Chapter 9

133 Dimensions of Quality Performance Aesthetics Special features
Conformance Safety Reliability Durability Perceived quality Service after sale

134 Cost of Quality Internal Prevention Appraisal External


Total Quality Management JIT/TPS BALDRIGE AWARD DEMING PRIZE ISO 9000/QS 9000/ISO 14000 Six Sigma Benchmarking


138 7 Basic Tools Flow Chart Check Sheet Histogram Pareto Chart
Scatter Diagram Cause & Effect Diagram Statistical Process Control

139 Flow Charts are used to... document a process improve understanding
reveal differences in methods uncover non-value added activities

140 Flow Charting Symbols Operation Decision Transportation
Inspection or check Delay Storage

141 Flow Chart Example: Self-Serve Gas Before Improvement
shut off engine walk to pay station Drive in self serve? check price to pump yes no turn on pump back to car pump gas walk to booth wait transmit approved? check card yes no copy to file return to car employee totals charges check accuracy prepare receipt sign copy on the road again copy to wallet

142 Flow Chart Example: Self-Serve Gas After Improvement
shut off engine check price go to pump self-serve? Drive in insert card in pump yes no wait for receipt store in system approved? yes on the road again pump gas check credit card wait no copy to wallet

143 CHECK SHEETS Data collection Preliminary analysis

144 Either a Tally Sheet Contents mixed Poor taste Low temperature
Utensils dirty Price issue Other

145 Or a Location Plot X X X X X X X X X

146 A histogram is a... descriptive statistical technique
graphical summary Uniform Bell-Shaped Bimodal

147 Pareto Charts Just like a histogram, except categories are arrayed greatest to least left to right Based upon the Pareto principle...

148 Pareto Diagram

149 Also a Pareto diagram

150 Scatter Diagram Measures relationships between numerical variables
Visual correlation (or regression) analysis

151 Class 1 Scatter Diagram Class 2 Exam Score Homework Problems

152 Cause & Effect Diagrams
Also known as fishbone diagrams or Ishikawa diagrams, after their creator Kaoru Ishikawa In general, used to find and cure causes (NOT symptoms) of problems

153 Basic Cause Effect Diagram
Level 2 cause Main Cause Level 1 cause Level 1 cause Problem to be Resolved (effect) Level 1 cause Level 1 cause Level 1 cause Level 1 cause Main Cause Main Cause Level 2 cause

154 Cause & Effect Example METHODS MANPOWER Drivers lost Poor dispatching
Chef late Large order snafus LATE PIZZA DELIVERY FRIDAY & SATURDAY Bad cars Small ovens Lack of ingredients MACHINES MATERIALS

155 Project Management Chapter 17

156 Project Management Project Vs. Process A good project manager Quality
Money Time

157 Project Life Cycles and Their Effects
Client Interest Conceptualization Planning Execution Termination Project Stake Resources Creativity Uncertainty

158 Work Breakdown Structure
Levels of detail Project Major tasks Subtasks Activities

159 Scheduling in Gantt Format

160 PERT/CPM Format Arc Node Activity Critical Path Dummy activity AOA AON

161 Act Pred Time A -- 6 E B 4 7 F C 3 G C, E 10 D 2 H D, F
BT Corp. would like to determine ES, EF, LS, LF and slack for each activity. The total project completion time and the critical path should also be determined. Activity times and predecessors are: Act Pred Time A -- 6 E B 4 7 F C 3 G C, E 10 D 2 H D, F

162 Project Scheduling Activity starting & ending times Total & Free Slack
ES rule EF rule LS rule LF rule Total & Free Slack

163 Probabilistic Pert 3 Time Estimates Mean Standard deviation & variance
Optimistic Pessimistic Most likely Mean Standard deviation & variance Z-score

164 Probabilistic PERT Given the sequence of activities with optimistic, most likely, and pessimistic times, determine the expected completion time of the project and the variance. What is the probability the project can be completed in 24 days or less? What deadline yields a 90% probability of finishing on time? 4, 7, 10 6, 9, 13 7, 10, 13

165 Activity Pred a m b A -- 9 10 11 B 4 16 C D 5 8
The estimated times and immediate predecessors for the activities in a project at Caesar Douglas’s retinal scanning company are given in the table below. Assume that the activity times are independent. Activity Pred a m b A -- 9 10 11 B 4 16 C D 5 8 Calculate the expected time and variance for each activity What is the expected completion time of each path? What is the variance of each path? If the time to complete AC is normally distributed, what is the probability it will be finished in 22 weeks or less? If the time to complete BD is normally distributed, what is the probability it will be finished in 22 weeks or less? Why is the probability that the critical path will be finished in 22 weeks not necessarily the probability that the project will be finished in 22 weeks?

166 Project Crashing Crashing a project involves paying more money to complete a project more quickly. Since the critical path determines the length of a project, it makes sense to reduce the length of activities on the critical path. CP activities should be reduced until the project is reduced to the desired length or you are paying more per day than you save. If you have multiple CPs, they should be shortened simultaneously.

167 Crashing (Time/Cost Tradeoffs)
Given the project specifications shown, how fast can the project be finished and how much will it cost? Act. Time Minimum $Cost/day Predecessor A B C B D C E A F D, E

168 Determine the cheapest completion time and cost for this project if it has a fixed cost of $1000 per day. ACTIVITY REQ TIME MIN TIME $/DAY 5 3, 8 6,

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